In April 2017, the HMRC clarified the VAT relief scheme for motorhomes (including other motor vehicles, such as caravans) that have been adapted for disabilities. The NCC (National Caravan Council), part of the UK’s leisure vehicle industry, welcomed the new changes with guidance on how vehicles can qualify.
Whilst this change has made leisure vehicles like motorhomes or campervans more financially accessible, there is eligibility criteria before you can qualify for zero rate VAT. In particular, the rules about “substantial and permanent” adaptations have caused quite a bit of uncertainty about how a motorhome can qualify.
Read on to find out how to qualify for zero-rated VAT on an adapted motorhome.
What is Zero Rate VAT?
The changes initiated on 1st April 2017 amended existing legislation under Value Added Tax Act 1994 (or VATA) and elaborates on possible exemptions. Under this Act, motor vehicles for the disabled can be zero-rated, but must first qualify.
Zero-rated VAT is a relief on paying or charging tax on an adapted vehicle if it meets the criteria set out by the HMRC. Typically, VAT is payable on most goods or services. If it’s zero-rated, however, the motor vehicle can be exempt from this tax.
According to the HMRC, the changes from April 2017 included:
- the introduction of a limit on the number of vehicles that can be purchased under the relief, with an eligible individual now being able to purchase only one vehicle that meets the qualifying conditions every 3 years
- making customer eligibility declaration forms mandatory
- making it mandatory for suppliers to send HMRC information about their zero rate supplies
- the introduction of a penalty that will apply to any person that provides an incorrect customer eligibility declaration form
How Does Zero Rate Tax Work?
It should be noted that zero-rated VAT is not a refund for existing taxed vehicles and can only be claimed during or before a transaction, rather than after a motor vehicle has been purchased. That means it’s to your advantage to research your eligibility for zero-rated tax beforehand, because any incorrect charges cannot be refunded at a later date.
What the Regulations Say About Qualifying
In order to qualify, the motor vehicle and its user must be eligible for VAT relief. The HMRC notices how qualifying vehicles must have “substantial and permanent adaptation” or be “designed to enable the disabled wheelchair user to travel in it”. This means motor vehicles, such as motorhomes, will either need to be designed or adapted at a later stage to support wheelchair users and those with other disabilities.
The HMRC summarise the eligibility as follows:
| Condition | Description |
|---|---|
| 1 | The vehicle seats no more than 12 people including the driver and must be supplied to a disabled person who normally uses a wheelchair or stretcher to be mobile |
| 2 | The vehicle must be designed or substantially and permanently adapted to enable the disabled wheelchair user or stretcher user to travel in it and the adaptation is necessary to enable that person to travel in the vehicle |
| 3 | The vehicle must be purchased for the domestic or personal use of the wheelchair or stretcher user |
| 4 | The vehicle supplied must not exceed the 3-year rule (unless an approved exception applies) |
| 5 | A customer eligibility declaration must be completed |
| 6 | The supplier can produce relevant documents, including the customer eligibility declaration to demonstrate eligibility for the zero rate and certain information is provided to HMRC |
Who Can Qualify for Zero Rated Relief on a Motorhome?
The HMRC defines an eligible wheelchair user as any person who frequently uses the support of a mobility aid, whether powered or manual. There are certain conditions and disabilities where a wheelchair is not necessarily used, and the zero-rated VAT can still be successfully claimed. Degenerative conditions (such as multiple sclerosis) can be included under the relief scheme.
There is, however, a strict difference between those who qualify for VAT relief, and those who do not. According to the HMRC, if you only occasionally or temporarily use a wheelchair, such as for light travel, you will not qualify.
In addition, mobility scooters are not defined as wheelchairs and, therefore, will not qualify for VAT relief under this scheme.
Adapted Motorhomes – Everything You Need to Know
Motorhomes can be eligible for VAT relief, but the HRMC recognises that, because this vehicle is both for travel and accommodation, it may require extra adaptations to become suitable for disabled users. The HRMC uses the example of adapted layouts especially for comfort and ease of use, to describe how a motorhome might be configured for greater support of disabilities.
The conditions of the motorhome must be adapted either “substantially or permanently” to fully support the wheelchair user. This can be broken down as follows:
- Substantial changes can be defined, within the scope of this VAT relief scheme, as any alterations that are welded or bolted to the chassis, body or frame of the motorhome. If changes are electrical, then a motorhome can still qualify.
- Permanent is defined when these changes last between either three years, or for the lifetime of the vehicle being adapted.
VAT can be reduced to reflect the cost of smaller, albeit necessary, changes, where minor adaptations have been made, such as for storing a wheelchair. Importantly, if changes don’t qualify as either “substantial or permanent”, then VAT is not reduced against the cost of the motorhome.
It’s often helpful to understand what is excluded from VAT relief as well. Less significant modifications range from roof racks to parking sensors. These can be understood as temporary or minor changes.
Specifically, the HMRC welcomes any changes that supports how a wheelchair user experiences the motorhome. This includes driving, travelling in, or leaving, a motorhome.
Are Minor Adaptations Covered?
If minor changes are requested by the wheelchair user, then the cost of these goods can be zero-rated. The vehicle price, however, would still be issued at the standard rate of VAT. Depending on the scope of works, vehicles may only qualify for the cost of goods to be zero-rated, rather than the value of the vehicle.
How Do I Register for Zero-Rated VAT?
The HMRC issues a customer declaration form available for those applying for zero-rated purchases.
Useful Links
- To discover more information on the reliefs available to disabled or older people, the UK government offers a helpline for guidance and advice.
- For general VAT enquiries, get in touch with an official representative here.
When purchasing a new motorhome or campervan, make sure you remain road legal and insured. For help with finding ideal road coverage, get in touch with us today.
